Where pharma’s future lies


As payers increasingly look at costing the value a drug brings, pharma must focus on, and publicise, the wider benefits its treatments bring to society, and stop the 'sales' mentality when interacting with doctors.

We are very privileged to live in the 21st century, when people are living longer and in better health than ever before. Though the pharmaceutical industry has contributed greatly to this, few are grateful and many people, politicians and payers distrust it.

Status quo: It is about money

In recent months some pharma companies have pulled out of particular areas of business. However, there can be many reasons why they end expensive research programmes. It may be because of poor results in phase II and III clinical trials, leaving researchers and experts disappointed, having in some cases spent years of their life tracking down a disease and trying to match a possible treatment.

But stepping out of a market may make sense if the new product will not have a commercial chance in the market. If competitors are there already, a 'me-too' with few clinical differences, even in biotechnological agents, makes no financial sense.

"The price agreed in one country would harm the pricing in many other countries"

Another reason for termination is when payers restrict the drug's price. Often, such pricing issues extend beyond a single healthcare system. In Europe, for example, what a healthcare system will pay for a drug depends on comparisons with prices in other countries. If a drug costs €10 in one country, the neighbouring country could say it will only pay €10 minus 20 per cent. The other most common way is price 'basketing', wherein the prices of a drug in a defined set of countries are put in a 'basket', the average is calculated and a country can then say: 'The price granted and paid by the tax-funded health system in our country is 50 per cent below the amount of the calculated price-basket'. This means that the price agreed in one country would harm the pricing in many other countries.

Financial toxicity threat

There are drugs which do not have a replacement – yet. There are great examples showing treatments from biotech companies really add value to patients' lives. But these have to compete with 'financial toxicity'. Drugs adding a few weeks to survival from an 'otherwise untreatable' condition, costing $10,000 a month are not really the problem. But in many cases and countries patients have to co-pay and in such cases they can lose all they have, assuming that they can afford the therapy at all.

This situation is leading to a commercial tipping point: the definition of the value a medicine might add and the cost of treatment. Financial aspects become toxic. This applies to a number of treatments for late-stage diseases, but also to some treatments for orphan diseases.

To be able to give a treatment granting a normal life expectancy to a child at the age of six can be viewed as a huge success but, on the other side of the coin, this lifetime treatment costs $100,000 or more per year. It needs to be financed, and it does not really make a difference if an individual or the State pays. The current disconnect between biopharma and payers is evident and virulent. The first toxic discussions have already started, when people find that the 'cost of goods' is around $100 and the cost of treatment about a thousand times higher.

Balance sheets show deficits

In financial reports there is a line indicating the 'intangible assets'. These are defined as non-monetary asset without physical presence. The value of a brand can be taken as an intangible asset. You remember the list of 'Top brands of the world' stating the skyrocketing values of Apple, Google etc. Interestingly, there is not one pharma company listed in Forbes' list of 'The world's most valuable brands'. The relationship between tangible and intangible assets has turned upside down in the last 30 years. Today more than 80 per cent of assets are 'intangible' in the Standard &Poor's 500 companies. (Source: oceantomo.com)

All this despite the fact that pharma employs brand managers. Something must be missing.

Symptom of fatal industry disease

Did the huge PR machine started around annual press conferences ever communicate the number of patients successfully treated with a drug? Did you ever hear in an annual press conference the 'burden of disease' reduced in suffering patients? Did you ever read about the improvement in 'quality of life' next to the financial statement?

Where is the value delivered by pharma and who delivers? As long as it is seen as wholly commercial and a money-printing machine, this industry will fail to deliver anything close to 'patient-centricity'.

The visible symptom of 'commercial greed' can be seen on the desks of almost every medical representative: the target to be achieved is indicated and marked in commercial figures. They have to achieve a specific revenue for a named product. They are still called salespeople, fully ignoring the fact that they do not sell, because a doctor does not buy! Their task is still called 'selling' and they are not even expected to 'serve' doctors or patients.

Sell or serve

The thought of a pharma industry 'selling' products to prescribers throws up many questions, particularly around delivering value. Pharma is probably the last industry sending myriads of 'sales people' to make unsolicited and unannounced calls to doctors, pharmacists and other healthcare providers. Often the reps are asked and trained to simply hammer out a promotional message and at the end ask the doctor to prescribe their product. Doctors, by profession, are philanthropists and usually educated well enough to endure such calls and suffer in silence. The consequence is that, after the mental doors have closed, the physical doors of doctors are closing too. Experienced reps must already have stopped doing what they are paid for in favour of having much better discussions with doctors, but only when their managers are not around.

"The problem lies in pharma's omnipresent commercial mentality, old fashioned concepts and inability to change"

The problem lies in pharma's omnipresent commercial mentality, old fashioned concepts and inability to change. The fact that pharma is highly regulated and incestuous when it comes to its employees only adds to the tragedy. Pharma is still involved in selling drugs: tangible assets – you remember?

The vast majority of drugs today are generic and many countries already request or only allow INN (International Non-proprietary Name) prescriptions. Doctors do not need information about a molecule which has been around for 10 or 15 years. So if providing data about half-life and evasion times is not really an option, what should pharma do?

In any case it was and will never be 'selling' drugs and using the word 'customer' about doctors is commercially wrong and professionally inappropriate. Prescribing physicians are not pharma's customers.

Hidden treasures in pharma

Medical and treatment expertise

There is no other place where so much knowledge and expertise about a specific disease and its treatment lies as in a pharmaceutical company. Pitifully all this treasure is hidden in medical and research archives, literature databases and the reports of clinical trials.

Problem solving instead of pill pushing

No one has better insight into clinics and doctor's offices than the reps who know around 200 to 300 surgeries intimately. Many of them know about the time constraints of a doctor and could use this information to improve the situation. They know how to attract patients to an office and they could have ideas for how to keep them engaged.

Though we are in the middle of the digital revolution, many HCPs are not reaping the potential benefits. Couldn't pharma reps be trained to assist?

Of course we must not forget the patients either. Imagine there are 10 companies offering the same generic drug. Which would be used more often? The one from a company 'selling drugs to doctors' or the competitor which offers a complex approach ensuring better patient outcome by improving drug adherence?

The second provider would, of course, deliver better value to every single doctor, the payer, patients, patients' relatives and next of kin and anyone else affected. Commercial success would follow the value delivered. It is never the other way round.

Delivering value is where the future lies.

About the author:

Hanno Wolfram is the founder and owner of www.Innov8.de, a Germany-based firm offering consultancy for pharmaceutical companies.

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9 December, 2014